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The Guardian: Dull does it for Shell – up to a point

Nils Pratley
Friday February 2, 2007

It is the largest annual profit recorded by a British company, or would be if only we could claim Shell as a true Brit. Shell has rarely looked and sounded so Dutch, from chief executive Jeroen van der Veer, who says with gross understatement that profits of $25.3bn (£12.9bn) made 2006 “by and large, a good year,” to finance director Peter Voser, who describes the miracle by which the loss of half the stake in the Sakhalin-2 project in Russia implies a reduction of a mere 100m barrels, or 1%, in Shell’s net reserves.

These Dutchmen may look grey but, one has to admire the way they have transferred perceptions. Van der Veer, don’t forget, got the top job only because of the reserves scandal that toppled his predecessor, Sir Philip Watts. He arrived with a message that the old inward-looking bureaucracy had to be reformed and has pursued the strategy with the minimum of fuss. BP’s exasperated shareholders, who might feel one of their problems is too much charisma, would kill for a dose of Dutch dullness.

Still, BP’s and Shell’s contrasting recent stories also illustrate how quickly fortunes change, even in an industry where short-term means the next decade. In Shell’s case, there are worries bubbling beneath the surface. Production targets have been cut for the next few years to 1%-2%; safe operations in the Niger Delta seem as far away as ever; and that boast about slight damage from Sakhalin owes much to a greater contribution from the oil sands of Canada, where economic viability requires an oil price above $30. That’s what we’ve got at the moment, of course, but you never can tell.

Even on Van der Veer’s view, growth in production will have to wait until after 2010, when huge investment in LNG in Qatar and other projects mature. A handsome hike in the dividend, taking the yield over 4%, is a strong statement of confidence in those projects. It’s the unscripted stuff that is the worry, like the plans to enter Iran, which would surely require the unofficial sanction of the US government, or the possibility of the oil industry being held properly to account for carbon emissions. Dullness can only get you so far.

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